The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year endedDecember 31, 2021 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSecurities and Exchange Commission (SEC) onMarch 1, 2022 . Past operating results are not necessarily indicative of results that may occur in future periods. Forward-Looking Statements The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which are subject to the "safe harbor" created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "will," "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item IA, "Risk Factors" in this Quarterly Report on Form 10-Q and in our other filings with theSEC . The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.
OVERVIEW
Chimerix ("Chimerix ," "we," "our," "us" or "the Company") is a biopharmaceutical company whose mission it is to develop medicines that meaningfully improve and extend the lives of patients facing deadly diseases. The Company is focused on developing imipridones as a potential new class of selective cancer therapies. The most advanced imipridone is ONC201 which is in clinical-stage development for H3 K27M-mutant glioma as its lead indication. In addition, imipridone ONC206 is currently in dose escalating clinical trials.
Recent Developments
TEMBEXA (brincidofovir, BCV)
The FDA granted TEMBEXA tablets and oral suspension approval for the treatment of smallpox. TEMBEXA is approved for adult and pediatric patients and is the first and only smallpox therapy approved for neonates. OnMay 16, 2022 , we announced entering into an agreement with Emergent BioSolutions, Inc. (Emergent) for the sale of TEMBEXA worldwide rights (the "Transaction") for$225 million upfront and additional milestones of up to$100 million to be paid contingent upon execution of optional future procurement awards from theBiomedical Advanced Research and Development Authority (BARDA) following the base period. Subject to closing of the Transaction, the upfront closing payment and the optional future milestone payments may be adjusted based on the final executed procurement contract between the Company and BARDA. The Company is also eligible to receive up to$12.5 million in regulatory milestones associated with the SymBio Pharmaceuticals Ltd. brincidofovir partnership to be assumed by Emergent. The Company may also earn a 20% royalty on future gross profit of TEMBEXA inthe United States associated with volumes above 1.7 million treatment courses of therapy during the exclusivity period of TEMBEXA. Outside ofthe United States , the agreement also allowsChimerix to earn a 15% royalty on all gross profit associated with TEMBEXA sales during the exclusivity period of TEMBEXA on a market-to-market basis. Emergent and the Company both filed a Premerger Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") onMay 26, 2022 with respect to the pending acquisition of the Company's exclusive worldwide rights to brincidofovir, including TEMBEXA® and related assets. OnJune 27, 2022 , Emergent, as the acquiring party, withdrew itsMay 26, 2022 filing, to provide the government with additional time for review, and resubmitted its HSR Act filing on or aboutJune 29, 2022 , commencing a new 30-day waiting period under the HSR Act. OnJuly 29, 2022 , the waiting period expired. This satisfies the closing condition related to theU.S. antitrust clearance of the Transaction. The Transaction remains subject to satisfaction of other closing conditions including the execution of the BARDA procurement contract and the approval of the pre-novation agreement betweenChimerix and Emergent by BARDA. 22 -------------------------------------------------------------------------------- Subject to the satisfaction or waiver of the closing conditions, the companies expect the transaction will close during the third quarter of 2022. We are currently in negotiation with BARDA on the terms of a TEMBEXA procurement contract. We will continue to lead this negotiation until its conclusion. We remain on track to deliver the expected TEMBEXA obligations associated with a potential procurement contract in the second half of 2022.
TEMBEXA Procurement Agreements
In lateJune 2022 , we announced entering into TEMBEXA procurement agreements for the procurement of TEMBEXA treatment courses. One agreement was for approximately$25.3 million withPublic Health Agency of Canada (PHAC) and an additional international contract was for$9.3 million .
On
Agreement) with a third party outside of
to which the Company is responsible for supplying to the Purchaser, and the
Purchaser is responsible for purchasing from the Company, TEMBEXA
(brincidofovir) treatment courses for use outside of
Under the terms of the Supply Agreement, the Purchaser has agreed to pay the Company an aggregate purchase price of approximately$9.3 million , to be made in two equal installments. The first installment, payable upon execution of the Supply Agreement, was received inJune 2022 . Deliveries pursuant to the international contract were completed inJuly 2022 , which completed the contract delivery obligations and resulted in the$4.7 million payment of the second installment of the purchase price inJuly 2022 . Additionally, onJune 23, 2022 , thePublic Health Agency of Canada (PHAC) awarded a Contract (the PHAC Contract) to the Company, pursuant to which PHAC will purchase up to approximately CAD$33.0 million ($25.3 million ) of TEMBEXA treatment courses for use inCanada . The term of the PHAC Contract continues until the deliveries of the TEMBEXA treatment courses under the PHAC Contract are complete. Substantially all of the procurement was delivered and accepted by PHAC inJuly 2022 , resulting in approximately$23 million of revenue. References to "CAD" are to the Canadian dollar. TheU.S. dollar equivalents listed above in this paragraph were calculated based on an exchange rate of CAD$1.00 to USD$0.7695 as of the close of business onJune 23, 2022 .
Imipridones – ONC201, ONC206 and ONC212
Imipridones are a potential new class of selective cancer therapies. Clinical trials of ONC201 in glioma patients with the H3 K27M-mutation are underway at several locations in theU.S. ONC201 is an orally administered small molecule dopamine receptor D2 (DRD2) antagonist and caseinolytic protease (ClpP) agonist for the treatment of gliomas that harbor the H3 K27M mutation.
ONC201 – Phase 3 Study (ACTION)
The ACTION study is a randomized, double-blind, placebo-controlled, multicenter international study in newly diagnosed diffuse glioma patients whose tumor harbors an H3 K27M-mutation. Treatment with ONC201 will occur shortly after completion of radiation therapy. The study is designed to enroll 450 patients randomized 1:1:1 to receive ONC201 at one of two dosing frequencies or placebo. Activation of sites is expected to begin by year-end and continue into the first half of next year at up to 120 sites inNorth America ,Europe andAsia Pacific . The first interim analysis is anticipated in early 2025 with final data in 2026. Participants will be randomized to receive 625mg of ONC201 once per week, 625mg twice per week on two consecutive days, or placebo. The dose will be scaled by body weight for pediatric patients. The primary endpoint of the study is overall survival (OS). The study will also evaluate progression free survival (PFS) with alpha control for both OS and PFS endpoints. OS will be assessed for efficacy at three alpha-allocated timepoints: two interim assessments by the Independent Data Monitoring Committee (IDMC) at 164 events and 246 events, respectively, and a final assessment at 327 events. The final PFS analysis will be performed after 286 events, with progression assessed using RANO HGG criteria by blinded independent central review (BICR). Secondary endpoints include corticosteroid response, performance status response, change from baseline in quality of life (QoL) assessments and change from baseline in neurologic function as assessed by the Neurologic Assessment in Neuro-Oncology (NANO) scale. Participants in the study must have a Karnofsky or Lansky performance status, a measure of patients' ability to perform ordinary tasks, of ?70 at time of randomization. Key exclusion criteria are the presence of a primary spinal tumor, diffuse intrinsic pontine glioma, evidence of leptomeningeal spread of disease or cerebrospinal fluid dissemination. Stratification factors include age (<21 years, ?21 years), and an assessment of risk factors including tumor location, tumor size, and number of tumors. 23 --------------------------------------------------------------------------------
ONC201 – Results from 50 Patient Cohort of ONC201 in H3 K27M-mutant Glioma
InNovember 2021 , we reported data from the 50-patient cohort for ONC201 for the treatment of H3 K27M mutant glioma at theSociety for Neuro-Oncology (SNO) Annual Meetings. The BICR of the 50-patient cohort determined an overall response rate (ORR) to be 20.0% (95% Confidence Interval (CI): 10.0-33.7%) as determined by Response Assessment in Neuro-Oncology Criteria for High Grade Gliomas (RANO-HGG). The median duration of response (mDOR) was 11.2 months (95% CI: 3.8 - not reached) and the median time to response (mTTR) was 8.3 months. The proportion of patients achieving either a RANO-HGG and/or RANO-LGG response was 30% (95% CI: 17.9 - 44.6%). One serious adverse event considered possibly ONC201-related by investigator was reported; however, the event was considered unlikely ONC201-related by sponsor assessment.
ONC206 and ONC212
ONC206 is a second generation imipridone, where pre-clinical models indicate potentially improved, anti-cancer activity relative to ONC201. ONC206 is currently being evaluated in Phase I dose escalation trials in partnership with theNational Institutes of Health (NIH) and with thePacific Pediatric Neuro-Oncology Consortium (PNOC). ONC206 is being considered for development in solid tumors, including potentially adrenal tumors, endometrial cancer and central nervous system (CNS) tumors. ONC212, which targets GPR132 and ClpP, is in ongoing IND-enabling toxicology studies which are expected to be completed in Q4 2022 with a decision to enter clinical studies expected in the first half of 2023. ONC212 is being explored pre-clinically in hematological malignancies, including AML, in partnership withMD Anderson Cancer Center and in solid tumors, including pancreatic cancer, in partnership withBrown University . A$3.4 million grant awarded toBrown University supports completion of IND-enabling studies and a potential first-in-human clinical trial.
CMX521
Chimerix continues development of CMX521 as a potential prophylactic and treatment of SARS-CoV-2 (COVID-19) infection in collaboration with the Rapidly Emerging Antiviral Drug Development Initiative (READDI) at theUniversity of North Carolina at Chapel Hill (UNC). READDI itself is a global public-private partnership founded at UNC by theUNC Eshelman School of Pharmacy ,UNC School of Medicine ,Gilling School of Global Public Health ,Eshelman Institute for Innovation and theStructural Genomics Consortium . The pre-clinical collaboration is currently focused on determining the potential for CMX521 to be delivered orally (vs inhaled) to the pulmonary system.
Business Development Review
In addition to our prior business development transactions management is continuing to conduct a review and assessment of potential transaction opportunities with the goal of building our product candidate pipeline, including, but not limited to, licensing, merger or acquisition transactions, issuing or transferring shares of common stock, or the license, purchase or sale of specific assets, in addition to other potential actions aimed at maximizing stockholder value. There can be no assurance that this review will result in the identification or consummation of any additional transaction.
FINANCIAL OVERVIEW
Revenues
To date, we have generated modest, non-recurring revenue from product sales.
Prior to 2022, all of our revenue to date has been derived from government
grants and a contract and the receipt of up-front proceeds under our
collaboration and license agreements.
TEMBEXA Procurement Agreements
OnJune 23, 2022 , the Company entered into a Supply Agreement (Supply Agreement) with a third party outside ofNorth America (Purchaser), pursuant to which the Company is responsible for supplying to the Purchaser, and the Purchaser is responsible for purchasing from the Company, TEMBEXA (brincidofovir) treatment courses for use outside ofthe United States . TEMBEXA is a medical countermeasure for smallpox approved by theU.S. Food and Drug Administration inJune 2021 . Under the terms of the Supply Agreement, the Purchaser has agreed to pay the Company an aggregate purchase price of approximately$9.3 million , to be made in two equal installments. The first installment, payable upon execution of the Supply 24 -------------------------------------------------------------------------------- Agreement, was received inJune 2022 . AtJune 30, 2022 , the$4.6 million payment is recorded in deferred revenue on the Consolidated Balance Sheet. Deliveries pursuant to the international contract were completed inJuly 2022 , which completed the contract delivery obligations and resulted in the$4.7 million payment of the second installment of the purchase price inJuly 2022 . Additionally, onJune 23, 2022 , thePublic Health Agency of Canada (PHAC) awarded a Contract (PHAC Contract) to the Company, pursuant to which PHAC will purchase up to approximately CAD$33.0 million ($25.3 million ) of TEMBEXA treatment courses for use inCanada . The term of the PHAC Contract continues until the deliveries of the TEMBEXA treatment courses under the PHAC Contract are complete. Substantially all of the procurement was delivered and accepted by PHAC inJuly 2022 , completing the performance obligation for those shipments and resulting in approximately$23 million of revenue. References to "CAD" are to the Canadian dollar. TheU.S. dollar equivalents listed above in this paragraph were calculated based on an exchange rate of CAD$1.00 to USD$0.7695 as of the close of business onJune 23, 2022 .
BARDA
InFebruary 2011 , we entered into a contract with BARDA, aU.S. governmental agency that supports the advanced research and development, manufacturing, acquisition, and stockpiling of medical countermeasures. The contract was a cost-plus fixed fee development contract. Under the contract we received$72.5 million in expense reimbursement and$4.6 million in fees, which ended onSeptember 1, 2021 and the contract expired in accordance with its terms. Under the BARDA contract, we recognized revenue of$0.3 million and$1.5 million during the three and six months endedJune 30, 2021 .
SymBio
InSeptember 2019 , we entered into a license agreement with SymBio for worldwide rights to develop, manufacture and commercialize TEMBEXA in all human indications, excluding the use for treatment of orthopoxviruses, including smallpox. In exchange for the license to SymBio for our TEMBEXA rights, we received an upfront payment of$5.0 million inOctober 2019 . In connection with the sale of TEMBEXA worldwide rights to Emergent, our rights and obligations under the SymBio license agreement will be assumed by Emergent. We could receive up to$12.5 million from Emergent in brincidofovir regulatory milestones related to the SymBio license agreement and will recognize revenue should any of the milestones be achieved. In the future, we may generate revenue from a combination of product sales, license fees, milestone payments and royalties from the sales of products developed under licenses of our intellectual property. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, milestone and other payments, and the amount and timing of payments that we receive upon the sale of our products, to the extent any are successfully commercialized. If we fail to complete the development of any product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.
Research and Development Expenses
Since our inception, we have focused our resources on our research and
development activities, including conducting preclinical studies and clinical
trials, manufacturing development efforts and activities related to regulatory
filings for our product candidates. We recognize research and development
expenses as they are incurred. Costs for certain development activities are
recognized based on an evaluation of the progress to completion of specific
tasks using information and data provided to us by our vendors. We cannot
determine with certainty the duration and completion costs of the current or
future clinical studies of any product candidates. Our research and development
expenses consist primarily of:
•fees paid to consultants and contract research organizations (CROs), including
in connection with preclinical and clinical trials, and other related clinical
trial fees, such as for investigator grants, patient screening, laboratory work,
clinical trial database management, clinical trial material management and
statistical compilation and analysis;
•salaries and related overhead expenses, which include stock option, restricted
stock units and employee stock purchase program compensation and benefits, for
personnel in research and development functions;
•payments to third-party manufacturers, which produce, test and package drug
substance and drug product (including continued testing of process validation
and stability);
•costs related to legal and compliance with regulatory requirements; and
•license fees for and milestone payments related to licensed products and
technologies.
The table below summarizes our research and development expenses for the periods
indicated (in thousands). Our direct research and development expenses consist
primarily of external costs, such as fees paid to investigators, consultants,
central
25
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laboratories and CROs, in connection with our clinical trials, preclinical
development, and payments to third-party manufacturers of drug substance and
drug product. We typically use our employee and infrastructure resources across
multiple research and development programs.
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Direct research and development expenses $ 10,981
Research and development personnel costs –
excluding stock-based compensation
4,695 4,628 10,023 9,090 Research and development personnel costs - stock-based compensation 1,827 1,765 3,730 3,142 Indirect research and development expenses 544 797 1,009 1,555 Total research and development expenses$ 18,047
The successful development of product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs of the efforts that will be necessary to complete the development of any product candidates or the period, if any, in which material net cash inflows from any product candidates may commence. This is due to the numerous risks and uncertainties associated with our business, as detailed in Part II, Item IA, "Risk Factors" in this Quarterly Report on Form 10-Q and in our other filings with theSEC .
TEMBEXA (Brincidofovir, BCV)
We developed TEMBEXA for the treatment of smallpox. FDA marketing approval for TEMBEXA was received onJune 4, 2021 . Under our cost-plus-fixed fee BARDA contract, we incurred expenses in connection with the development of orthopoxvirus animal models, the demonstration of efficacy and pharmacokinetics of TEMBEXA in the animal models, the conduct of clinical studies for subjects with DNA viral infections, the manufacture and process validation of bulk drug substance and TEMBEXA 100 mg tablets and TEMBEXA 10 mg/mL oral suspension, and submission of the NDAs to the FDA. In addition, we have incurred additional supportive costs for the development of TEMBEXA for smallpox that we did not seek reimbursement for from BARDA. We have incurred costs related to the manufacturing of TEMBEXA for a possible procurement contract. These costs were expensed as incurred until theJune 2021 FDA approval. Following the approval, costs related to the manufacturing of TEMBEXA are recorded and shown as inventories on the Consolidated Balance Sheets.
Imipridones program
InJanuary 2021 , we acquired Oncoceutics. In connection with the transaction, we recorded$82.9 million of acquired in-process research and development expenses for the three months endedMarch 31, 2021 , which included$25.0 million for an upfront payment to Oncoceutics,$43.4 million related to the fair value of 8,723,769 shares common stock issued to Oncoceutics, a$14.0 million promissory note due on the one-year anniversary of the acquisition, and$0.3 million related to transaction costs consisting primarily of legal and professional fees. As we continue to develop and prepareOncoceutics' lead compound, ONC201, for aU.S. regulatory approval, we expect to incur significant research and development expense. We also plan to incur development expenses in connection with the continued development of other Oncoceutics compounds, including ONC206 and ONC212. Dociparstat sodium (DSTAT) With the decision to stop development of DSTAT, we are currently in the process of closing our Phase 3 DASH AML trial. Due to the decision to terminate the program we have recorded$4.5 million of contract close-out accruals. We expect the close-out activities related to this program to extend through mid-2023 as we continue treatment for enrolled patients on the trial and begin to close down clinical trial sites.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related
costs for employees in executive, finance, commercial, investor relations,
information technology, legal, human resources and administrative support
functions, including share-based compensation expenses and benefits. Other
significant general and administrative expenses include costs related to
accounting and legal services, costs of various consultants, director and
officer liability insurance, occupancy costs and information systems.
26 --------------------------------------------------------------------------------
Interest Income and Other, Net
Interest income and other, net consists primarily of interest earned on our
cash, cash equivalents and short-term and long-term investments.
Share-based Compensation
TheFinancial Accounting Standards Board authoritative guidance requires that share-based payment transactions with employees be recognized in the financial statements based on their fair value and recognized as compensation expense over the vesting period. Total consolidated share-based compensation expense of$3.6 million and$1.8 million was recognized in the three months endedJune 30, 2022 and 2021, respectively, and$3.7 million and$3.1 million was recognized in the six months endedJune 30, 2022 and 2021, respectively. The share-based compensation expense recognized included expense for stock options, RSUs and employee stock purchase plan purchase rights. We estimate the fair value of our share-based awards to employees and directors using the Black-Scholes pricing model. This estimate is affected by our stock price as well as assumptions including the expected volatility, expected term, risk-free interest rate, expected dividend yield, expected rate of forfeiture and the fair value of the underlying common stock on the date of grant.
For performance-based RSUs, we begin to recognize the expense when it is deemed
probable that the performance-based goal will be achieved. We evaluate the
probability of achieving performance-based goals on a quarterly basis.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES
Our management's discussion and analysis of financial condition and results of operations is based on our unaudited consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States of America (GAAP). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenues and expenses that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates. In addition, our reported financial condition and results of operations could vary if new accounting standards are enacted that are applicable to our business. We discussed accounting policies and assumptions that involve a higher degree of judgment and complexity in Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for the year endedDecember 31, 2021 filed with theSEC onMarch 1, 2022 . There have been no material changes during the six months endedJune 30, 2022 to our critical accounting policies, significant judgments and estimates disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2021 . 27
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RESULTS OF OPERATIONS
Comparison of the Six Months Ended
The following table summarizes our results of operations for the six months
ended
(in thousands except percentages):
Six Months Ended June 30, Dollar Change % Change
2022 2021 Increase/(Decrease)
Revenues:
Contract and grant revenue $ - $ 1,823 $ (1,823) (100.0) %
Licensing revenue 455 3 452 15,066.7 %
Total revenues 455 1,826 (1,371) (75.1) %
Cost of goods sold 114 - 114 *
Gross Profit 341 1,826 (1,485) (81.3) %
Operating expenses:
Research and development 37,087 25,660 11,427 44.5 %
General and administrative 11,472 8,544 2,928 34.3 %
Acquired in-process research and
development - 82,890 (82,890) (100.0) %
Total operating expenses 48,559 117,094 (68,535) (58.5) %
Loss from operations (48,218) (115,268) 67,050 (58.2) %
Other (loss) income:
Interest income and other, net (17) 90 (107) (118.9) %
Net loss $ (48,235) $ (115,178) $ 66,943 (58.1) %
*Not meaningful or not calculable
Contract and Licensing Revenue
For the six months endedJune 30, 2022 , total contract and licensing revenue decreased to$0.5 million compared to$1.8 million for the six months endedJune 30, 2021 . The decrease of$1.4 million primarily related to the conclusion of our development contract with BARDA.
Cost of Goods Sold
For the six months endedJune 30, 2022 , cost of goods sold was$0.1 million and for the six months endedJune 30, 2021 we did not record any cost of goods sold. The increase of$0.1 million is attributable to the write-off of inventory deemed nonsalable.
Research and Development Expenses
For the six months endedJune 30, 2022 , our research and development expenses increased to$37.1 million compared to$25.7 million for the six months endedJune 30, 2021 . The increase of$11.4 million primarily related to the following: •an increase of$12.6 million primarily related to ONC201 research and development expenses, clinical pharmacology trials and start-up expenses related to the Phase 3 study of ONC201 (ACTION) in patients who harbor the H3 K27M-mutation and$2.0 million related to the manufacture of drug substance and drug product; and •an increase of$1.7 million in compensation expenses, of which$0.6 million relates to non-cash compensation to support development of our current pipeline; offset by •a decrease of$2.0 million in brincidofovir development expenses; and •a decrease of$0.8 million in operational and legal fees. 28 --------------------------------------------------------------------------------
General and Administrative Expenses
For the six months endedJune 30, 2022 , our general and administrative expenses increased to$11.5 million compared to$8.5 million for the six months endedJune 30, 2021 . The increase of$2.9 million primarily related to the following: •an increase of$1.3 million in compensation, of which$1.0 million relates to non-cash stock compensation and •an increase of$1.6 million in legal and other operational expenses.
In connection with our acquisition of Oncoceutics inJanuary 2021 , we recorded a total of$82.9 million of acquired in-process research and development expenses for the six months endedJune 30, 2021 , which included$25.0 million for an upfront payment to Oncoceutics,$43.4 million related to the fair value of the 8,723,769 shares of common stock issued to Oncoceutics, a$14.0 million promissory note due on the one-year anniversary of the acquisition and$0.3 million related to transaction costs consisting primarily of legal and professional fees.
Interest Income and Other, Net
For the six months endedJune 30, 2022 , our interest income and other, net decreased to expense of$17,000 compared to income of$0.1 million for the six months endedJune 30, 2021 . This decrease is attributable to amortization of deferred loan costs and investment premium balances offsetting interest earned.
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months endedJune 30, 2022 andJune 30, 2021 , together with the changes in those items (in thousands, except percentages): Three Months Ended June 30, Dollar Change % Change 2022 2021 Increase/(Decrease) Revenues: Contract and grant revenue $ -$ 390 $ (390) (100.0) % Licensing revenue 440 1 439 43,900.0 % Total revenues 440 391 49 12.5 % Operating expenses: Research and development 18,047 13,798 4,249 30.8 % General and administrative 5,840 4,408 1,432 32.5 % Total operating expenses 23,887 18,206 5,681 31.2 % Loss from operations (23,447) (17,815) (5,632) 31.6 % Other (loss) income: Interest income and other, net (21) 52 (73) (140.4) % Net loss$ (23,468) $ (17,763) $ (5,705) 32.1 %
Contract and Licensing Revenue
For the three months ended
licensing revenue was
Research and Development Expenses
For the three months endedJune 30, 2022 , our research and development expenses increased to$18.0 million compared to$13.8 million for the three months endedJune 30, 2021 . The increase of$4.2 million primarily related to the following: •an increase of$4.8 million in research and development expenses, of which$3.8 million primarily related to start-up expenses in conjunction with our planned Phase 3 study of ONC201 (ACTION) in patients who harbor the H3 29 -------------------------------------------------------------------------------- K27M-mutation and safety database finalization. An additional$1.0 million related to the manufacture of ONC201 drug substance and drug product and the conduct of animal studies; and •an increase of$0.3 million in compensation expenses; offset by •a decrease of$0.9 million in brincidofovir development expenses following the approval of TEMBEXA inJune 2021 .
General and Administrative Expenses
For the three months ended
expenses increased to
ended
following:
•an increase of
•an increase of
related to non-cash stock compensation expense.
Interest Income and Other, Net
For the three months endedJune 30, 2022 , our interest income and other, net decreased to a loss of$21,000 compared to income of$52,000 for the three months endedJune 30, 2021 . This decrease is primarily attributable to loan fee amortization offsetting interest earned.
LIQUIDITY AND CAPITAL RESOURCES
As ofJune 30, 2022 , we had capital available to fund operations of approximately$42.8 million . Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. We have incurred losses since our inception in 2000 and as ofJune 30, 2022 , we had an accumulated deficit of$933.8 million . We may continue to incur losses for the foreseeable future. The size of our losses will depend, in part, on the rate of future expenditures and our ability to generate revenues. OnAugust 10, 2020 , we entered into an Open Market Sale AgreementSM (the Jefferies Sales Agreement) withJefferies LLC , as agent, pursuant to which we may offer and sell, from time to time through Jefferies, up to$75 million of shares of our common stock. Sales of our common stock made pursuant to the Jefferies Sales Agreement, if any, will be made under our shelf registration statement on Form S-3 (File No. 333-244146), which was declared effective by theSEC onAugust 17, 2020 . As ofJune 30, 2022 , we have not sold any shares of our common stock under the Jefferies Sales Agreement. OnJanuary 20, 2021 , we entered into an underwriting agreement (the Underwriting Agreement) withJefferies LLC andCowen and Company, LLC , as representatives of the several underwriters named therein (collectively, the Underwriters), relating to the issuance and sale of 11,765,000 shares (the Shares) of our common stock. The price to the public in this offering was$8.50 per share, and the Underwriters agreed to purchase the Shares from us pursuant to the Underwriting Agreement at a price of$7.99 per share. Under the terms of the Underwriting Agreement, we granted the Underwriters a 30-day option to purchase up to 1,764,750 additional shares of our common stock at the public offering price. The net proceeds to us from this offering were approximately$107.8 million , as the Underwriters' option to purchase additional shares was exercised in full, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The offering closed onJanuary 25, 2021 . OnMay 6, 2021 , we filed an automatic shelf registration statement on Form S-3 with theSEC (the 2021 Shelf Registration Statement), which became effective upon filing, pursuant to which we registered for sale an unlimited amount of any combination of our common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, so long as we continue to satisfy the requirements of a "well-known seasoned issuer" underSEC rules. However, since we no longer qualify as a well-known seasoned issuer, onMarch 1, 2022 , we filed two post-effective amendments to the 2021 Shelf Registration Statement to convert it to a non-automatic shelf registration statement that we are eligible to use. The amendment to the 2021 Shelf Registration Statement to convert to a non-automatic shelf registration was declared effective by theSEC onMay 2, 2022 and enables us to offer for sale, from time to time, in one or more offerings, up to$250 million in the aggregate, of common stock, preferred stock, debt securities, warrants, rights and/or units. The 2021 Shelf Registration Statement will remain in effect for up to three years from the date it initially became effective. As ofJune 30, 2022 , no sales have been made under the 2021 Shelf Registration Statement. OnJanuary 31, 2022 , we entered into a Loan and Security Agreement (the Loan Agreement) withSilicon Valley Bank . The Loan Agreement provides for a four-year secured revolving loan facility (the Credit Facility) in an aggregate principal amount of up to$50.0 million . Proceeds from the Credit Facility may be used for working capital and general corporate purposes. We 30 --------------------------------------------------------------------------------
have no obligation to draw down any amount under the Credit Facility, and have
not drawn down any amount as of
OnMay 15, 2022 , we entered into an agreement to sell TEMBEXA to Emergent for$225 million upfront plus future milestones and royalty payments. The$225 million upfront payment is subject to adjustments based on the final executed procurement agreement between BARDA and the Company. Subject to the satisfaction or waiver of the closing conditions, including anti-trust clearance inthe United States and the finalization of the TEMBEXA procurement contract with BARDA, we expect this transaction will close during the third quarter of 2022. We cannot assure that adequate funding will be available on terms acceptable to us, if at all. Any additional equity financings will be dilutive to our stockholders and any additional debt may involve operating covenants that may restrict our business. If adequate funds are not available through these means, we may be required to curtail significantly one or more of our research or development programs, and any launch and other commercialization expenses for any of our products that may receive marketing approval. We cannot assure you that we will successfully develop or commercialize our products under development or that our products, if successfully developed, will generate revenues sufficient to enable us to earn a profit.
We believe that our expected cash flow from sale of TEMBEXA to Emergent,
existing cash, cash equivalents, and investments will enable us to fund our
current operating expenses and capital requirements for at least the next 12
months. However, changing circumstances beyond our control may cause us to
consume capital more rapidly than we currently anticipate.
Cash Flows
The following table sets forth the significant sources and uses of cash for the
period (in thousands):
Six Months Ended June 30,
2022 2021
Cash sources and uses:
Net cash used in operating activities $ (34,007) $ (50,619)
Net cash provided by (used in) investing activities 60,167 (82,745)
Net cash (used in) provided by financing activities (13,471) 111,820
Net increase (decrease) in cash and cash equivalents $
12,689
The table above sets forth the net decrease or increase in cash and cash equivalents alone and not the change in our total capital available to fund operations, which also includes short-term and long-term investments. Cash and cash equivalents includes cash on hand and securities with original maturities of 90 days or less. Operating Activities Net cash used in operating activities of$34.0 million for the six months endedJune 30, 2022 was primarily the result of our$48.2 million net loss, partially offset by the change in operating assets and liabilities and the add-back of non-cash adjustments. The change in operating assets and liabilities includes an increase of$7.1 million in accounts payable and accrued liabilities and a decrease in prepaid expenses and other assets of$0.9 million , offset by an increase in inventories of$1.4 million . Non-cash expenses included add-backs of$7.3 million for share-based compensation,$0.1 million of amortization of deferred loan costs and$0.1 million of amortization of discount/premium on investments. Net cash used in operating activities of$50.6 million for the six months endedJune 30, 2021 was primarily the result of our$115.2 million net loss, partially offset by the change in operating assets and liabilities and the add-back of non-cash expenses. The change in operating assets and liabilities includes an increase of$2.1 million in accounts payable and accrued liabilities and a decrease in accounts receivable of$0.3 million , partially offset by an increase in prepaid expenses and other assets of$1.8 million . Non-cash expenses included add-backs of$43.4 million for the fair value of common stock issued in relation to the Oncoceutics acquisition,$14.0 million for the note payable due on the one-year anniversary of the Oncoceutics acquisition,$5.7 million for share-based compensation,$0.1 million of depreciation of property and equipment and$0.4 million of amortization of discount/premium on investments.
Investing Activities
Net cash provided by investing activities of$60.2 million for the six months endedJune 30, 2022 was primarily the result of the maturity of$57.7 million in short-term investments and the sale of$7.7 million in short-term investments, partially offset by the purchase of$5.3 million in short-term investments. Net cash used in investing activities of$82.7 million for the six months endedJune 30, 2021 was primarily the result of the purchase of$100.9 million in short-term investments and the purchase of 31 --------------------------------------------------------------------------------$7.6 million in long-term investments, partially offset by the maturity of$23.9 million in short-term investments and the sale of$2.0 million in short-term investments. Financing Activities Net cash used by financing activities of$13.5 million for the six months endedJune 30, 2022 was primarily the result of the$14.0 million payment of the note payable related to the Oncoceutics acquisition and the payment of$0.1 million of debt issuance costs, partially offset by$0.7 million in proceeds from the exercise of stock options and stock purchases through our ESPP. Net cash provided by financing activities of$111.8 million for the six months endedJune 30, 2021 was primarily the result of$107.8 million in proceeds from the issuance of common stock and$4.0 million in proceeds from the exercise of stock options and stock purchases through our ESPP.
MATERIAL CASH REQUIREMENTS
The discussion below summarizes our significant contractual obligations and
commitments as of
Leases. See Note 3 of Notes to Consolidated Financial Statements included in
this Quarterly Report on Form 10-Q for information, including the future
operating lease minimum payments.
supply agreement with SPL, we are required to purchase an additional
million
this contract is terminated earlier commensurate with its termination
provisions.
In addition to the amounts set forth above, we have payment obligations under license agreements that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones. We will be required to make additional payments when certain milestones are achieved, and we are obligated to pay royalties based on future product sales. As ofJune 30, 2022 , we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales. In connection with the development and commercialization of ONC201 and ONC206, in addition to royalties on product sales, we could be required to pay former Oncoceutics securityholders up to an aggregate of$340.0 million in remaining milestone payments, assuming the achievement of all remaining applicable milestone events under the merger agreement. Additionally, we enter into contracts in the normal course of business with CROs for clinical trials and clinical supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes, which generally provide for termination or cancellation within 30 days of notice. We also have agreements with our executive officers that require the funding of specific payments, if certain events occur, such as a change in control or the termination of employment without cause. 32
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